Introductory rate home loans are designed with first home buyers in mind. They offer a low rate of interest for a special promotional period (normally about a year), which helps keep your payments down. It’s not unusual for this low rate to be a whole percentage point below the standard rate.
Once the honeymoon rate period is over, the interest rate reverts to the product’s standard variable rate. If this revert rate is too high, you can consider refinancing to a cheaper home loan. This can take a little time and money, but will save you money in the long run.
Your lender may have another, similar loan product you could switch to instead of refinancing with a completely new lender.
The most attractive feature of a honeymoon loan is of course its low introductory rate, but before you choose your new home loan, consider the different ways you can save interest in the first years of your mortgage.
If you would like to see what effect additional repayments have on your mortgage, check our extra repayment calculator.
Make note of your home loan's honeymoon period. It's usually only for one or two years. Your lender may notify you when the period ends, but they might not. Either way, check your home loan statement or log onto your lender's website and check the new rate your loan is now on. It's likely higher than the honeymoon rate.
Then you should do the following:
Taking out a home loan can seem like a huge mountain to climb. But when you break it down into these 10 key steps, it becomes much easier.
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